Underreporting of Earnings and the Minimum Wage Spike
This paper documents a positive correlation within European labour markets between the proportion of full-time employees with earnings on the minimum wage and the extent of underreporting of earnings in the economy. Using a simple model of a competitive labour market, I show how this correlation can emerge as a result of the common dependence of both quantities on the strength of enforcement of fiscal regulation. This suggests that a high spike in the wage distribution at the minimum wage level is, in some contexts, an issue of fiscal enforcement, more than a labour market issue.
|Date of creation:||Aug 2011|
|Publication status:||published in: IZA Journal of European Labor Studies, 2013, 2:2|
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